China Bonds Update

Big news today after the Occupy movement is officially over.

(Bloomberg) — China will no longer require a minimum amount of operating funds to be transferred from a foreign bank’s parent to its newly-established Chinese branch, according to a statement posted on the State Council’s website.

  • New rules no longer require foreign banks to first establish a Chinese representative office before they set up branches or joint ventures
  • Foreign banks will be able to apply for renminbi business if they have operated in China for at least a year, vs. previous requirement of three years
  • Foreign banks applying for renminbi business are no longer required to have made profits for two consecutive years before submitting application
  • New rules will start to take effect from Jan. 1
(Bloomberg) — China will accelerate liberalization of interest rates and encourage a multilayered capital market as the country seeks to adapt to a “new normal” of slower growth, according to an official at the central bank.
China will move ahead with deregulation of interest rates to make its financial system more competitive and more comprehensive, capable of discovering and fostering new growth engines, Pan Gongsheng, deputy governor of the People’s Bank of China, said today at a conference in Beijing. The country also needs to build a multilayered capital market, increasing the role of equity financing to let more companies access funds, he said.
And China to the rescue of Russia.
China offered enhanced economic ties with Russia at a regional summit this week as its northern neighbor struggled to contain a currency crisis.

“To help counteract an economic slowdown, China is ready to provide financial aid to develop cooperation,” Premier Li Keqiang said at a Dec. 15 gathering in Astana, Kazakhstan. While the remark applied to any of the five other nations represented at the meeting of the Shanghai Cooperation Organization group, it was directed at Russia, according to a person familiar with the matter who asked not to be named as the plans weren’t public.http://www.bloomberg.com/news/2014-12-19/did-china-float-a-bailout-offer-for-crisis-hit-russia-.html

Well, we now know that part of the reason for the rally is $39 bio in insurance capital according to the China Securities Journal.

 

The clean up continues in China as 63,000 officials were forced to quit their company directorships. http://www.shanghaidaily.com/article/article_xinhua.aspx?id=259820

My thoughts – all these changes and more changes as all signs point to a slowdown which is substantiated by the rise in bad loans at CCB, ICBC, BOC and Agricultural Bank of China.

china banks bad loans

Rates spiked on the week on 12 IPO pricings into next week, the stock market breaking a 4 year high, rising 24% in just 1 month ! even as the Shanghai-HK Connect demand falls for a 4th consecutive week to its lowest since launch.

USDCNH up to a new 6 mth high of 6.2238.

All these building up into expectations for Q1 rate cut next year, if you ask me.

Leaving you with the indicative prices.

CNH BONDS

CNH BONDS 2